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Alibris and BetterWorldBooks Strange Bedfellows An Interview with Alibris CEO Brian Elliott by Craig Stark #137, 24 August 2009 Nothing like a good controversy to get those bookselling forums buzzing again, and this time both the Alibris and Amazon forums were unusually active in the wake of Alibris partnering with BetterWorldBooks - a company that, let's say, isn't held in high regard among at least some members of the bookselling community, who in turn aren't thrilled with the prospect of an association with them. Earlier this week, Alibris CEO Brian Elliott agreed to discuss some of the concerns and questions booksellers have with this recent change. Before the interview, I spent several hours studying the relevant forum posts and also discussed this matter with a few booksellers. Out of this I came away with what I think are the principal issues, and I put these to Brian. Appended to the interview are two items of interest. One, BWB co-founder Xavier Helgesen initially posted an open letter on the Alibris forum that, in my opinion, addressed the issues being raised with exceptional clarity, and he has granted us permission to re-publish it here. And two, a slightly different version of BOOKTHINK News Editor Karin Bergsagel's comments on the Alibris forum alluded to in the interview appears after Xavier's letter. BOOKTHINK: Brian, prior to announcing your partnership with BetterWorldBooks, were you aware that many booksellers have formed less than favorable opinions about this company - or has the generally heated response in forums, etc., surprised you? ELLIOTT: We knew that some booksellers had an unfavorable opinion of BWB. The heat generated has been higher than expected, but people with longevity in this business recognize that these events flare up from time to time. I'm glad that our team was able to listen, react and come up with a set of solutions quickly - we had one solution before the partnership launched, and the opt-out decision within 24 hours of launching this partnership and in place the next day. We work to incorporate seller input into what we do at Alibris. A few examples: we've interviewed over 30 sellers in the past two weeks about feature upgrades to the seller Storefronts on Alibris; we have discussion boards where we regularly take the back and forth into our decision making processes; we attend shows and conventions; and not least, our CS team is in daily discussions with sellers and are integrated into our product development processes. We historically do not pre-disclose potential business partnerships, such as the four launched in the last month - Akademos, Borders UK, Coutts and BetterWorldBooks. Those are confidential relationships while in development, but we'll find a ways to do more in the future. BOOKTHINK: Can you tell us your reasons for entering this partnership? ELLIOTT: We believe our decision to partner with Better World Books is a good one for our sellers. In this tough economy, the number one thing we hear from sellers is that they want more sales. We've been working hard to make that happen, and we think these efforts are paying off: Our sellers are seeing sales growth over 2008; August sales are up 20% over last year. In July, we launched three new partnerships - Borders UK (a separately owned and operated company from Borders in the US), Akademos (who supplies colleges with online stores) and Coutts (an academic library distributorwholesaler). This month week we've launched a partnership with Better World Books. Better World Books' web site generates a lot of traffic and potential customers, and they BWB realizes that they do not have the inventory to appeal to them all of those buyers. Like many other large, warehouse-based sellers they are largely selling standard "reading copy" product. BWB and Alibris have partnered so that Alibris sellers can take advantage of the traffic and customers on the BWB website, and so that BWB can turn visitors into buyers on their website by offering a broad selection. This is proving out in the initial going - in the first day we had well over 200 orders from BWB, only two of which were to sellers who had asked to "opt out" of the BWB program. BOOKTHINK: No doubt you're all too aware of most or all of the specific concerns booksellers have about this, but I'll present what I see to be the more pressing ones and ask for your responses to each: There's a perception among some booksellers that BWB postures itself as a charitable organization (as opposed to the for-profit corporation it actually is) and thereby exercises considerable leverage in exploiting sources of inventory that private bookselling businesses once relied heavily on. Entering into contractual agreements with FOL groups, effectively shutting down public access to locally donated books, troubles booksellers especially. Partnering with Alibris will in all likelihood help BWB strengthen this leverage, at least indirectly, and just as likely put even more booksellers out of business. ELLIOTT: Sellers have different perceptions of BWB, different even amongst themselves. We have worked with BWB for years. They have been a good seller with a very high satisfaction rating among Alibris' buyers. We've talked with them about their business practices, donations and charitable giving. Specific questions about BWB's business should be addressed to them. They are actively involved in this discussion and have already answered many sellers' questions on our discussion board. [EDITOR'S NOTE: Click here for the discussion.] Sellers have also posted their own takes on the broader topic of BWB's purchasing practices - for example, Karin Bergsagel's post on our discussion board. [EDITOR'S NOTE: See Karin's comments following Xavier Helgesen's open letter.] Like many larger-scale warehouse based sellers, BWB price aggressively to sell a high volume of broadly available books. The world of online bookselling continues to grow and evolve. BWB themselves face a number of similar competitors. More importantly, an increasing number of FOL groups, charitable organizations (like Goodwill and Salvation Army) and others are also "cutting out everyone" by selling online themselves. BOOKTHINK: Understood, but I think there may be a perception among some booksellers that, by partnering with BWB, Alibris would be helping them grow - and part of this growth would necessarily include a strengthening inventory-acquisition presence and, in turn, further hurt the smaller seller who once used the same sources. It's this latter seller, I presume, who feels that Alibris isn't doing them any favors. ELLIOTT: We know inventory acquisition can be a challenge. Large scale sellers like BWB want to buy in bulk, and are looking to strike deals with large suppliers of used books such as Goodwills and large FOLs, competing with each other there and also seeing their sources starting to sell directly online themselves. If BWB customers buy Alibris sellers' books, the vast majority of the funds from those purchases go back to Alibris sellers, strengthening them. I'm sure that FOL groups, libraries and others would welcome offers from local sellers. Alibris is working hard to help all independent sellers by exposing their inventory to the largest possible set of buyers. BWB raised money that they are using to market to book buyers, creating an opportunity for Alibris sellers to sell more books. Sellers have traditionally sold to one another, knowing that they're each buying and selling books - this is one more opportunity. But sellers now have the ability as well to decline to participate. Alibris is working on programs that make it easier for all of our sellers to use Alibris to fulfill the demands of their buyers. More of this will be coming before the year-end. BOOKTHINK: There's concern, especially among more advanced booksellers, that listings appearing on the BWB venue with selling IDs appended to them will be unfavorably colored by an implied association with a corporation that is, fairly or not, often perceived as a penny seller - and by this I mean a seller who effectively drives book prices ever downward by aggressively undercutting competitors, offering deeply discounted shipping rates and, among other things, achieving efficiencies by using boilerplate descriptions and minimizing buyer/seller interactions. ELLIOTT: As you note, perceptions are "fairly or not," but this concern is why we first created the ability for sellers to not have their identity show on BWB's web site. Several sellers availed themselves of that option. For others, we've also decided to allow booksellers to opt out of the BWB program. I'd also reiterate that it's not our team's experience that BWB minimizes interactions - they seem to do quite well there. BOOKTHINK: There's also a perceived conflict of interest. BWB isn't a listing service as such but a competing bookseller. It's one thing to compete on, say, Alibris with other sellers, each clearly independent of the other, quite another to be subsumed by a competitor. Apart from this being tantamount to dropshipping (for some, a sort of distasteful aspect of bookselling), it also sets up a situation whereby BWB necessarily has more interest in selling its own inventory than that of the vendors it's "warehousing." This may or may not affect these vendors adversely, but it's at the very least a source of unease. ELLIOTT: BWB does have clear interest in selling its own stock first - as does any bookseller. But they also have a large number of people shopping on their web site who are looking for books that BWB does not stock, sales that are now going to Alibris sellers. As you know, there's a long history in this industry of bookseller-to-bookseller sales; if I don't have a copy of a title my customer wants, I'll see if another bookseller has it - that was, after all, the foundation of Interloc and online bookselling in the first place. In this case, a minority of sellers don't want to sell to this competing bookseller, so we've created an opt-out option. Last, this isn't a dropshipping operation. The design is such that sellers are listed on BWB's web site (and only their web site), clearly identified individually - unless they don't want to be identifiedparticipate. BOOKTHINK: At BOOKTHINK, for the purposes of discussion, we often make a distinction between commodity bookselling and antiquarian (or artifact) bookselling, commodity books being those which are typically purchased for content, antiquarian those purchased as collectibles, though of course this artificial division is quite blurred in reality. In any case, as BWB books expands its operation and acquires a greater share of the so-called antiquarian market, there's concern that this will to some extent have a "commoditizing" effect on antiquarian books, potentially dumbing down the profession and degrading values of an entire class of books that presently provide many booksellers with much of their profit. ELLIOTT: This presumes that BWB, and only BWB, gets their hands on a copy or two of everything and that a warehouse-based operation, geared to sell commodities, can effectively describe and sell a rare or antiquarian book. BWB and others like them have been around for years, as have casual sellers. The truly antiquarian market is still out there - and has higher demands both on the supply side and the selling side. Craig, how would this work anyway? If the concern is that BWB is getting the same materials that sellers have been getting from FOL sales, they are getting access to the same supply. A book is rare and valuable by definition because the item is in scarce supply and there is demand for it. BWB isn't changing supply; they're simply getting their hands on it. If sellers are concerned about the impact on price of antiquarian books, they ought to look to the print on demand scanning operations with a lot more dread. Even there, the value is more typically in the physical, collectible copy itself - and if BWB gets an antiquarian book, puts a lame description on it and sells it for a ludicrously low price, some seller ought to snatch it up! BOOKTHINK: And some seller likely will. What I was getting at is - and, by the way, this isn't one of my concerns at all; I'm just playing devil's advocate for those who have expressed it - there's a concern that dumping larger and larger numbers of antiquarian books out there in the, I don't know, rag-tag clothing of amateur descriptions on a venue that has a reputation for treating books as commodities will somehow affect them indirectly by way of, let's say, creating a perception among potential buyers that antiquarian books many not be as special as they really are nor the profession of bookselling as distinguished as it once was. Any thoughts on this? ELLIOTT: I would still hold that limited supply is exactly that - limited in nature. If BWB cannot do a good enough job describing and pricing their inventory, then the suppliers of that inventory - whether FOL programs, university libraries, Goodwills, et al - ought to be able to do better with other sellers or on their own. This is similar to what Karin pointed out in her post - the laws of supply and demand aren't repealed. The profession of bookselling has changed radically in the last decade, and will continue to evolve. I've known a large number of antiquarian sellers who love to tell stories of the gem they found at the bottom shelf of a store or underpriced on an online service that where the seller didn't know what it had on its hands and was willing to sell for $5. The occasional low price and lack of description hasn't changed that market historically, nor driven away collectors. BOOKTHINK: Yes, I could tell one or two of those stories myself. Another concern - Alibris listings appearing on BWB are bumped up in price, presumably to account for shipping discounts offered. The effect could well be to render these listings less competitive on the BWB venue, not to mention reduce rankings on search engines, in some cases sending them to second or later pages. ELLIOTT: Regarding pricing and search rankings, it is up to BWB to manage their own search engine optimization and how their shipping fees affect their rankings. If you're concerned that you won't be getting enough sales from BWB, then you're probably not worried about trying to opt out of the program. BOOKTHINK: I realize that you've posted an announcement that answers this question, but for those who might not have seen it, is there a potential for Alibris sellers who also list on Amazon to be flagged as operating double accounts, or is there a mechanism to prevent this? ELLIOTT: The only thing that we will do with BWB is to list our sellers' books on their site. They will not take sellers' listings, aggregate them as their own, and send them out again to all the sites they list on. Alibris is providing BWB access to seller inventory for sale onbetterworldbooks.com only. Period, done, eEnd of story. No one needs to worry about being shut down on Amazon or having duplicate listings anywhere. BOOKTHINK: Given the number sellers requesting an opt-out opportunity for this partnership, are you considering making this change? Meanwhile, will it be possible for sellers to cancel sales derived from BWB without affecting their performance ratings? [EDITOR'S NOTE: Subsequent to this interview, an opt-out option has been created with, as the poet said, majestic instancy.] ELLIOTT: We are working on an opt-out option with BWB, who have been very responsive and accommodating. The technical challenges of coming up with a scalable and manageable solution are not insignificant. Bringing on new business partners requires very complex, custom integrations. Better World Books is using the Alibris Search API to get inventory information, which is the same search API used by many other business partners. Adding an opt-out option could slow down searches for everyone if it isn't done very carefully. We are in the "back to school" freeze period (meaning we try not to make production code changes during the peak - it's risky) right now, so we don't yet have a timeline for making it happen. Both Alibris and BWB engineers are working now on solutions. Right now, sellers have the option to aggregate their inventory under the Alibris name, so that seller information is not displayed on the BWB site. Despite the change freeze, BWB and Alibris have worked together to make this option available this month. Some sellers have discussed cancelling orders, which we don't want to encourage. The person who bought the book you cancel won't know that it was canceled for ethical reasons; they'll just have a lousy customer experience. The best way for a seller to stay competitive and grow their business is to fill all the orders they get. The BWB partnership launched yesterday, and of the first two hundred orders placed, only a handful were cancelled - nothing above the normal rates. Only two orders went to sellers who had requested to be removed from the program. BOOKTHINK: Are you experiencing many seller account cancellations? ELLIOTT: No. A handful of sellers said that they would quit Alibris if they couldn't opt out of the BWB program. Given that we've created the ability to opt out, we hope everyone stays. We take what sellers say seriously - hence our work to accommodate their requests as quickly as is feasible. We hope these sellers will see that Alibris and BWB are both working hard to accommodate their wishes, and will be patient with us while we work out the technical details. BOOKTHINK: Many thanks, Brian. ____________ Open Letter from the Co-Founder of Better World Books to the Alibris Seller Community I wanted to take the opportunity to address the Alibris community to say how excited we are to partner with all of you. As we have grown the Better World Books brand, more and more people have been choosing to shop with us first when they buy books online. While we have a wide selection of books under one roof, it pales in comparison to the selection of 13,000 sellers pooled together. Our partnership with Alibris was driven by that simple idea: why not help others build their businesses while increasing selection for our customers? The used book business is a competitive business, so I'm not surprised that there a few vocal opponents of the partnership. As with any message board, a vocal few can drown out the vast silent majority. Most sellers I have talked with welcome the wider exposure that their books will receive. In fact, the partnership between Alibris and Better World Books is a prime example of cooperation and competition combined. We both compete for used book supply and customer loyalty, but we are both happy to pay the other for helping to sell more books. In those circumstances, everyone wins, most importantly the customer. There seems to be some misunderstanding among these few about what we are and what we are not. I would recommend anyone who wants to learn more about what we do to read our website and the numerous interviews we have done. I can address a few main points I saw raised here, but feel free to contact me personally at Xavier at BetterWorldBooks dot com. You'll find we are nice people trying to do something good in the world. We serve our customers and our non-profit partners first and foremost, and if you have the pleasure to talk with them, you'll hear a testament to our integrity and ethics. Point #1. Will I be paid the same if a book is sold through BWB? Absolutely. The whole point is to expose more buyers to your inventory, and make sure there are no downsides to selling through our site. Point #2. Does Better World Books sell everything for a penny? No way. We hate selling books for a penny as much as you do. But basic economics tells you that if there's more supply than demand, prices will drop. Sad to say, the right price for some books is probably a penny. It also turns out that customers like to pay less money rather than more. Just like most sellers, our business is built around acquiring used books that are in demand and selling them for the best price we can get. Point #3. Does Better World Books masquerade as a non-profit? No. We are very clear on our "about us" section of our website. The first line of our FAQ reads: "Better World Books is a self-sustaining, for-profit social venture whose mission is to capitalize on the value of the book to fund literacy initiatives locally, nationally and around the world." Feel free to read the rest here: http://www.betterworldbooks.com/info.aspx?f=iaq Point #4. Better World Books killed my favorite local book sale. I do take offense to this one. Librarians aren't dumb - they choose to work with BWB overwhelmingly because we sell lots of their books for optimal prices and share the proceeds fairly, rather than cherry-picking a few books than can be sold at multiples of 10 or 100 times what was paid. I have no objection to people who do this, but I find it hard to sympathize when their library decides that they want fair value for their books and want a partner who can help them. Point #5. Better World Books gives away too little money. I am the first to admit that 10% of revenue (please note - that is revenue, NOT profit), which is our current rate, doesn't sound like a lot. It is, however, the highest we know of for any company over $1 Million in revenue, bookseller or otherwise. Most of our fellow booksellers know how many hidden expenses there are in selling used books - commissions, postage, packaging, employees, rent, etc. We have the additional expense of shipping books inbound from throughout the US and Canada. Ultimately, I think the right number is set by the market. If we contribute too little to libraries and our non-profit partners, they won't want to work with us. If we give away too much, we won't be able to stay in business. I believe that where we are now is about right. I am incredibly proud of our metric of $6.5 Million raised for literacy, and we are doing it through a sustainable model. Point #6. Will Better World Books repost my inventory on other marketplaces? No. It makes no economic sense and it is prohibited in the deal anyway. Point #7. Why would I support a competitor? All of the angry posters sell on Alibris, and I would guess that most sell on Amazon, Barnes & Noble. All of these companies warehouse and sell used books and make no bones about it. B&N does it through their MBS division, Amazon through Fulfillment by Amazon and their WarehouseDeals account, and Alibris through Alibris Distribution Services. All three have a far larger share of the book market than BWB. Secondly, while BWB does take a commission on the sale, you get the lion's share of the money. Ask yourself, is it better to have screen space on a competitor's website and receive most of the money from their customers, or be invisible to their customers? Even if you view us as a direct competitor, the smartest thing you can do is take orders from our customers and grow your business. Point #8. Are the people posting in BWB's defense corporate shills? Please. We are always transparent when employees post, as in this letter. If any BWB employee was posting under a shill name, and we found out about it, they would be fired. I would like to thank those folks who support what we're doing, or at least have a more nuanced view. In particular, I thought Karin Bergsagel's post was excellent, and I am reposting below. [EDITOR'S NOTE: See Karin's post following this letter.] Point #9. Is BWB an evil monopoly set to rule the world? We are less than 0.1% of the US book market. Even with a warehouse ten times our size, we couldn't stock a fraction of the used books in the USA. Further, many independent sellers can and do compete with us. Some run as efficiently, or even more. Some compete with better descriptions of books or a specialization. Some compete by combining offline and online. Some cultivate a base of loyal customers. Ultimately, the customer decides, which is the way it should be. Point #10. Will my books sales on BWB fund literacy? Yes. We will contribute part of our commission on the sale to our general literacy fund. Our customers vote on what projects are funded through this program. We don't disclose specific literacy funding percentages from any line of business, but we expect to raise tens of thousands of dollars for literacy in our first year of this partnership. All funding will be public and posted to our blog and website. Point #11. Can you contact BWB to opt out of the program? No. There was some confusion about this because of a mis-interpretation of a conversation with a BWB employee. Please contact Alibris directly at sellers@alibris.com. Point #12. What is the most entertaining thing to do in Mishawaka, Indiana? The first is a Notre Dame football game. The second is a visit to the Studebaker museum. The third is to stop by and visit us. Please reach out if you'd like to stop by. Many independent sellers buy books from us, and even if you aren't interested in that, our warehouse is a lot of fun. Once again, I could not be more excited about this partnership, both for the sake of our customers and for the seller community on Alibris. This is a win-win for all parties involved. Sincerely, F. Xavier Helgesen ____________ Karin Bergsagel's Forum Post I truly believe that a small, independent, professional bookseller can take on BWB any day and win. I have bought books from BWB, and always been pleased with the books and the customer service. I consider them an ethical business. I hear a lot of the basic Catholic social teachings in their mission and commitments. IMO, much of what I have been hearing the last couple of days has been the usual resentment by some booksellers of BWB for having found a workable business model in an evolving business, since it would be laughable to imagine that an individual bookseller could not compete against BWB's boilerplate descriptions on a book-by-book basis. It is access to inventory that fans the flames. I see a lot of booksellers with a sense of entitlement. For years, these booksellers have been able to buy their inventory for pennies on the dollar from unwitting FOLs, and now that these sources have learned the value of what they have to offer, these same booksellers are upset that the FOLs have found a more profitable way of selling, whether through their own online sales, or through partnering with businesses like BWB. The irony is that, if they had been willing to offer a fair deal to their local FOL in the first place, the FOL would probably not have turned to BWB, but would have preferred a local alternative. And don't underestimate the value to an organization of having someone else (i.e. BWB) take over book sales - it is a huge volunteer effort, and volunteers are aging. To speak only of FOLs - they have a duty to their donors to make sure that maximum value is extracted from their donations. Ideally, this would not only be the cash value of the books, but also the value to the community of an annual book sale, with books available to the community at reasonable prices. There is still plenty of room for individual booksellers to partner with FOLs who do not want to sell online themselves to sell their more valuable inventory for them, still leaving lots of books for the annual sale. They just need to be prepared to pay a fair price for the privilege. Traditionally, booksellers expected their business costs to break into thirds: 1/3 to acquire inventory; 1/3 to overhead; 1/3 to profit. And you know what, none of it will matter for long - the growth of digital media and print-on-demand will radically change the landscape of used bookselling - considering how to adapt to that is what a bookseller should be devoting energy to.